Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
Separating true intrinsic value from speculation isn’t easy, especially during bull markets. That’s where StockStory comes in - to help you find high-quality companies that will stand the test of time. That said, here is one high-flying stock with strong fundamentals and two climbing an uphill battle.
Two High-Flying Stocks to Sell:
Freshpet (FRPT)
Forward P/E Ratio: 33.4x
Standing out from typical processed pet foods, Freshpet (NASDAQ: FRPT) is a pet food company whose product portfolio includes natural meals and treats for dogs and cats.
Why Does FRPT Fall Short?
- Revenue base of $1.04 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Negative free cash flow raises questions about the return timeline for its investments
- Push for growth has led to negative returns on capital, signaling value destruction
Freshpet is trading at $51.99 per share, or 33.4x forward P/E. Dive into our free research report to see why there are better opportunities than FRPT.
OPENLANE (KAR)
Forward P/E Ratio: 31.3x
Facilitating the sale of approximately 1.3 million used vehicles in 2023, OPENLANE (NYSE: KAR) operates digital marketplaces that connect sellers and buyers of used vehicles across North America and Europe, facilitating wholesale transactions.
Why Do We Think KAR Will Underperform?
- Annual sales declines of 5.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
OPENLANE’s stock price of $29.09 implies a valuation ratio of 31.3x forward P/E. Check out our free in-depth research report to learn more about why KAR doesn’t pass our bar.
One High-Flying Stock to Watch:
Dutch Bros (BROS)
Forward P/E Ratio: 83.3x
Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE: BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States.
Why Do We Watch BROS?
- Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
- Same-store sales growth averaged 5.4% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Free cash flow margin increased by 9.8 percentage points over the last year, giving the company more capital to invest or return to shareholders
At $58.80 per share, Dutch Bros trades at 83.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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